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UPMC v. CBIZ, Inc.

United States District Court, W.D. Pennsylvania

September 15, 2017



          KIM R. GIBSON, JUDGE

         This case arises from the acquisition of a healthcare facility in Altoona, Pennsylvania. Plaintiffs allege that defendants' actuarial valuation of that facility's pension plan understated the plan's liabilities by $132.5 million, and that this valuation caused plaintiffs to unwittingly assume those liabilities. This opinion does not delve deep into those allegations. Instead, it addresses a voluminous discovery dispute between the parties-specifically, plaintiffs' motion for protective order (ECF No. 53) and defendants' motion to compel (ECF No. 56). For the reasons below, both motions will be denied in part and granted in part.

         I. Relevant Background

         The University of Pittsburgh Medical Center-UPMC-is a nonprofit corporation that operates healthcare facilities in the western part of Pennsylvania. UPMC is also the parent company for numerous entities throughout Pennsylvania that provide healthcare services. UPMC Altoona is one such entity. UPMC Altoona operates healthcare facilities in and around Blair County, Pennsylvania, and is headquartered in-as its name suggests-Altoona, Pennsylvania. UPMC Altoona was known as Altoona Regional Health System (hereinafter “Altoona Regional”) until July 1, 2013, when it was acquired by UPMC.

         This case stems from that acquisition. CBIZ, Inc. and its subsidiary, CBIZ Benefits & Insurances Services, Inc. (hereinafter “CBIZ B&I”), provide retirement-plan services for organizations, including services such as actuarial valuations, certifications and statements of accounting liabilities, actuarial determinations of legally required retirement plan contributions, 401k plan designs, and insurance-benefits consulting. From 2002 through February 2015, CBIZ and CBIZ B&I performed actuarial valuations for Altoona Regional's (and, after it was acquired by UPMC, for UPMC Altoona's) two largest pension-benefit plans. In that capacity, CBIZ and CBIZ B&I prepared certifications of the liabilities of those pension-benefit plans and prepared certain certified governmental filings regarding those plans on behalf of Altoona Regional and UPMC Altoona. Jon S. Ketzner is an actuary who was employed by CBIZ and CBIZ B&I until his retirement in early 2015. For at least the 13 years prior to retirement, Ketzner was the lead (and only) actuary to value the obligations and liabilities of Altoona Regional's and UPMC Altoona's two largest pension-benefit plans.

         On September 16, 2016, UPMC and UPMC Altoona filed this case against CBIZ, Inc., CBIZ B&I, and Ketzner. Plaintiffs allege that-from at least July 1, 2008, through February 2015- defendants failed to adhere to actuarial standards of practice and that, as a result, they significantly undervalued the obligations and liabilities of Altoona Regional's and UPMC Altoona's pension-benefit plans. Plaintiffs assert, among other things, that defendants understated the plans' Projected Benefit Obligations-the amount of money to be paid into the plans to satisfy all pension entitlements-by roughly $132.5 million, and overstated Altoona Regional's profitability as a result. Plaintiffs assert also that UPMC purchased Altoona Regional in reliance on defendants' erroneous valuations. UPMC Altoona brings claims for professional negligence and breach of contract against all defendants, while UPMC brings a claim for negligent misrepresentation against all defendants. Defendants moved to dismiss plaintiffs' claims and that motion remains pending. In the meantime, discovery has begun and is ongoing.

         On July 20, 2017, plaintiffs filed a motion for protective order (ECF No. 53). Plaintiffs seek an order stating that they do not have to respond to certain document requests and interrogatories propounded by defendants. Plaintiffs argue that these discovery requests are not relevant, unduly burdensome, and not proportional to the needs of the case. On July 21, 2017, defendants filed a motion to compel documents from UPMC (ECF No. 56). Both motions are now fully briefed and ready to be decided.

         II. Jurisdiction & Venue

          UPMC is a Pennsylvania nonprofit corporation with its principal place of business in Pittsburgh, Pennsylvania. (ECF No. 1 ¶ 1.) UPMC Altoona is likewise a Pennsylvania nonprofit corporation, with its principal place of business in Altoona, Pennsylvania. (Id. ¶ 2.) Plaintiffs allege that CBIZ, Inc. is a Delaware corporation with its principal place of business in Cleveland, Ohio, that CBIZ B&I is a Missouri corporation (they do not mention CBIZ B&I's principal place of business), and that Ketzner resides-and presumably mean that he is domiciled-in Maryland. (Id. ¶¶ 4-7.) Plaintiffs seek damages “in an amount no less than” $142 million. (Id. at 18.) Thus, this case is between citizens of different states and the amount in controversy exceeds $75, 000. This Court therefore has subject-matter jurisdiction over plaintiffs' claims under 28 U.S.C. § 1332(a)(1). And because a substantial part of the events giving rise to plaintiffs' claims occurred in the Western District of Pennsylvania, venue is proper in this district under 28 U.S.C. § 1391(b)(2).

         III. Legal Standard

         Federal Rule of Civil Procedure 26 provides the general framework for discovery in federal civil litigation. Rule 26(b)(1) defines the scope of discovery as “any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” This scope formerly included matters that were “reasonably calculated” to lead to the discovery of admissible evidence, but Rule 26 as amended-and effective December 1, 2015- no longer includes this language. A matter is relevant if “it has any tendency to make a fact more or less probable than it would be without the evidence; and . . . the fact is of consequence in determining the action.” See Fed. R. Evid. 401. In determining whether discovery is proportional to the needs of the case, courts must consider “the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Fed.R.Civ.P. 26(b)(1).

         Rule 37 provides the mechanism to compel discovery from a person or party who refuses to provide discovery. The party moving to compel discovery under Rule 37 bears the initial burden of proving the relevance of the material requested. See Morrison v. Phila. Hous. Auth., 203 F.R.D. 195, 196 (E.D. Pa. 2001) (citations omitted). If the movant meets this initial burden, then the burden shifts to the person resisting discovery to establish that discovery of the material requested is inappropriate. Momah v. Albert Einstein Med. Ctr., 164 F.R.D. 412, 417 (E.D. Pa. 1996) (citation omitted). The person resisting discovery must explain with specificity why discovery is inappropriate; the boilerplate litany that the discovery sought is overly broad, burdensome, oppressive, vague, or irrelevant is insufficient. See Josephs v. Harris Corp., 677 F.2d 985, 991-92 (3d Cir. 1982).

         Rule 26(c) authorizes a person or party resisting discovery to move for a protective order. If the movant establishes good cause for such an order, then the court may impose restrictions on the extent and manner of discovery “to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.” Fed.R.Civ.P. 26(c)(1). “Good cause is established on a showing that disclosure will work a clearly defined and serious injury to the party seeking closure.” Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1071 (3d Cir. 1984) (citation omitted). This injury, too, must be shown with specificity; “[b]road allegations of harm, unsubstantiated by specific examples or articulated reasoning, ” do not establish good cause. Cipollone v. Liggett Grp., Inc., 785 F.2d 1108, 1121 (3d Cir. 1986) (citation omitted). Additionally, Rule 26(b)(2)(C) provides that-on motion or its own initiative-the court must limit the extent of discovery if it determines that “the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive, ” or that “the proposed discovery is outside the scope permitted by Rule 26(b)(1).”

         IV. Discussion & Analysis

          Two motions are before the Court: plaintiffs' motion for protective order (ECF No. 53) and defendants' motion to compel (ECF No. 56.) Although there are some discrepancies between the exact discovery requests addressed in the two motions, [1] the dispute in both motions boils down to an argument about whether the requests at issue fall within the scope of discovery provided by Rule 26(b)(1). The Court will thus analyze the motions together.

         To do so, however, it is first necessary to know the exact discovery requests that are disputed. The parties' submissions are less than clear on this point; they cite numerous requests throughout their motion and brief (ECF Nos. 53, 57), but both of their proposed orders (ECF Nos. 53-2, 56-2) include language regarding requests never explicitly cited in their motion and brief. Because the parties' proposed orders appear to be the most comprehensive listings of the disputed requests, the Court will analyze the parties' motions with respect to the requests referenced in the proposed orders. These are defendants' requests for production numbers 9-20, 35-44, 56, 69, 72-75, 78-81, 84, 92, and 94-98. (See ECF Nos. 53-2, 56-2.) Plaintiffs also seek a protective order with respect to numbers 7-8 and 10 of defendants' interrogatories to UPMC. (ECF No. 53-2.)

         There is one more notable issue with the parties' motions. Although their proposed orders give some guidance on the disputed requests, the parties do not clearly connect their arguments to specific discovery requests. Thus, when it is not entirely clear which requests a specific argument applies to, the Court will analyze the argument generally in an attempt to clarify the scope of allowable discovery.

         A. Negligent-Misrepresentation Claim

         Because the parties' arguments are based on UPMC's negligent-misrepresentation claim, it is useful to outline the elements of such a claim under Pennsylvania law before addressing the arguments. The Pennsylvania Supreme Court has adopted § 552 of the Restatement (Second) of Torts for negligent-misrepresentation claims like the claim in this case. See Bilt-Rite Contractors, Inc. v. Architectural Studio, 866 A.2d 270, 287 (Pa. 2005) (“we hereby adopt Section 552 as the law in Pennsylvania in cases where information is negligently supplied by one in the business of supplying information”).[2] Section 552 provides in relevant part:

(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, [negligently] supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information . . . .
(2) [This liability] is limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and
(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

         To establish liability under § 552, a plaintiff must show that (1) the defendant was in the business of providing information for the guidance of others, (2) the defendant had a pecuniary interest in the transaction in which he provided the information, (3) the information was false, (4) the defendant failed to exercise reasonable care in obtaining or communicating the information, (5) the plaintiff justifiably relied on the information, and (6) the plaintiff suffered injury as a result. See Excavation Techs., Inc. v. Columbia Gas Co. of Pa., 936 A.2d 111, 115-16 (Pa. Super. Ct. 2007). Implicit in this last element is a causation requirement. See Bouriez v. Carnegie Mellon Univ., 585 F.3d 765, 771 (3d Cir. 2009) (“proximate cause is an essential element of both fraudulent misrepresentation and negligent misrepresentation claims” (citation omitted)); Gibbs v. Ernst, 647 A.2d 882, 890-91 (Pa. 1994) (describing elements of negligent-misrepresentation claim under Pennsylvania common law, including proximate-cause requirement).

         While § 552 contains the elements of a negligent-misrepresentation claim (with § 552(2) limiting what kind of loss is recoverable), § 552B governs the issue of damages for a negligent-misrepresentation claim. Section 552B provides:

(1) The damages recoverable for a negligent misrepresentation are those necessary to compensate the plaintiff for the pecuniary loss to him of which the misrepresentation is a legal cause, including
(a) the difference between the value of what he has received in the transaction and its purchase price or other value given for it; and
(b) pecuniary loss suffered otherwise as a consequence of the plaintiff's reliance upon the misrepresentation.
(2) the damages recoverable for a negligent misrepresentation do not include the benefit of the plaintiff's contract with the defendant.

         Although the Pennsylvania Supreme Court has explicitly adopted § 552, it has not-yet-adopted § 552B. Federal courts in this circuit, however, have predicted that the Pennsylvania Supreme Court would adopt § 552B if the issue presented itself. See Brand Mktg. Grp. LLC v. Intertek Testing Servs., N.A., 801 F.3d 347, 356 (3d Cir. 2015) (“we predict that the Pennsylvania Supreme Court would adopt § 552B”); Torres v. Borzelleca, 641 F.Supp. 542, 546 (E.D. Pa. 1986) (“It is this Court's prediction, however, that the Pennsylvania Supreme Court would follow [S]ection 552B . . . .”). Because this Court agrees with that prediction-and because both plaintiffs and defendants rely on § 552B (see ECF Nos. 53 at 5, 57 at 4)-the Court applies § 552B here.

         B. Defendants' Discovery Requests

         According to defendants, the disputed requests for production relate to four categories of documents:

(1) post-acquisition documents regarding the financial performance of Altoona [Regional], including the consideration paid by UPMC, Altoona[] [Regional's] value, and the financial benefit derived by UPMC from the acquisition, (2) post-acquisition valuations and assessments regarding Altoona[] [Regional's] impact on UPMC's health insurance business, (3) specific limited documents regarding similar acquisitions by UPMC involving defined benefit plans, and (4) pension valuation reports prepared by UPMC's own actuaries for UPMC's pension plans, apart from Altoona [Regional].

(ECF No. 57 at 4.) Condensing a dispute about 39 document requests to 4 categories makes it a lot more manageable, but not all of the disputed requests support defendants' categorization. For example, requests 9-19 and 94-97-which defendants contend fall within the first two categories of requests seeking postacquisition documents (see ECF No. 56-2 at 1)-contain no language limiting the requests to postacquisition documents. Some of these requests actually disclaim such a limitation. (See ECF No. 56-1 ¶¶ 9 (“2008 to present”), 10-11 (“2011 to present”), 12-13 (“2008 to present”), 14 (“2011 to present”), 15 (“prior to and after the Acquisition”) 16-19 (no temporal scope), 94 (“2008 to the present”) 96-97 (same).) Based on defendants' arguments, the Court assumes that defendants are now limiting these requests to postacquisition documents only. The Court will thus analyze defendants' first two categories of requests accordingly.

         1. Postacquisition Financial Information (Requests 9-20, 72-75, 92, and ...

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